Apple Watch: When Failure Equals Success

Again and again, {complink 379|Apple Inc.} turns what would be tantamount to disaster for many other companies into a widely celebrated success. It's not a lesson in best-practices, and I certainly wouldn't recommend it for any other company, but the supply snafu surrounding the recently launched iPad is another example of how Apple can be treated differently from others in its group.

Reports indicate that the new iPad is already “out of stock,” even before the formal available-for-sale date of March 16. In all countries where the new iPad (as opposed to iPad 2) is scheduled to be released — France, Germany, Japan, Switzerland, the UK, and the US — Apple is telling customers the product is already sold out. Delays are now running two to three weeks in some countries. In the US, AT&T and Verizon are only accepting customers' email addresses for later notification. Translation? They have no clue when the product will be available.

In a normal world, this would be considered a disaster. Apple either failed to anticipate demand for the new iPad, or it purposely tightened supply to create an artificial shortage. Given Apple's record, I am inclined to say the company didn't build enough redundancy into its system to satisfy what it should have known would be very strong demand. This was the type of supply chain failure that Apple continues to repeat with each product launch — and for which it has yet to pay a price.

If demand for competing products had been as strong, and if those products were in sufficient supply, Apple would have found a solution to this problem. This points clearly to a staggering failure on the part of its competitors.

In Apple Land — that rarefied world populated by folks who believe anything Apple is golden — this is a buying and selling opportunity, rather than a supply chain failure. Those lucky to get their hands on the new iPad are trying to sell the device on eBay for up to three times the $499 value of the base item. Apple's stock price is rocketing higher and looked likely this morning to push through its 52-week high of $548.21, further propelling the company's market value past the $500 billion mark.

Well, surprise! Right after I wrote the above paragraph, I checked the premarket trading and noticed that Apple had already surged past its 52-week high to $549.50 and was rising. The shares jumped to a new high of $550 when the market opened today, and they may climb even higher. The stock performance is reflected in an EBN poll asking people whether they would sell Apple shares now or wait for further appreciation. When the poll was posted last week, respondents were split on the question, but over the weekend, they shifted overwhelmingly toward holding rather than selling. More than half the respondents have selected “Sell? That would be crazy.” (See Crazy about Apple.)

Crazy about Apple would seem to sum it up. But there's more at play here. What else could be driving the stock appreciation so soon after the iPad launch? It certainly isn't just the new product. Most pundits and some consumers have called it underwhelming. Contrary to expectations, the new iPad features only incremental improvements to the iPad 2, mainly in the display and camera.

The upswing in market valuation is due partly to the demand for the new iPad, which is so strong that potential buyers are being told to wait. A spokeswoman for Apple has said the demand is “off the charts.” I don't know what chart the company is using, but perhaps it needs to build a new one. This one stinks.

16 comments on “Apple Watch: When Failure Equals Success

  1. Barbara Jorgensen
    March 12, 2012

    Bolaji: My initial reaction was a lot less charitable than yours. How many times has Apple been around this block? Three, four or more? And they still can't estimate demand? The industry's biggest company, with a market cap of more than many nations, that has created the must-have technology devices of the past decade, has once again been caught unaware that demand outstripped supply?

    The only thing surprising about this is people actually continue to believe it.

  2. bolaji ojo
    March 12, 2012

    Apple provided no details on this great success. It only said the iPad sold out. What's not clear is how many the company manufactured for the launch, 400, 4000, 400,000, 4 million? What's even more irritating about this — aside from potential customers left to scramble — is the unquestioning statements from analysts and journalists proclaiming how the new iPad was an outstanding success. What exactly is being measured here and what are the criteria used to determine success? When also is Apple going to stop playing this game and who will question the company about it?

  3. Anna Young
    March 12, 2012

    Apple does not live in a normal world. It's apparent. This is a common trend with the company each time a new product is launched. I'm tempted to think Apple is deliberately creating an artificial shortage. I think it's a strategy on Apple's part. A strategy that's it's worth paying dearly for. On the contrary it's paying off for the company on the back of a hyped review. Amazing!

  4. _hm
    March 12, 2012

    It may be that Apple is more concerend about quality of their product. They give breathing time to engineers and manufacturer`s to provide parts in quantity with no compromise in quality. This is very sound approach.


  5. bolaji ojo
    March 13, 2012

    If that's the case then Apple is using the first set of buyers as guinea pigs. Would that be a correct assessment?

  6. Ariella
    March 13, 2012

    @Bolaji @Anna I'm amazed that people do not demand that information. A sell out sounds impressive, but one can make just about anything a sell out if the numbers are planned to fall short of demand. Apple must have a pretty good idea idea of the number of people who were in the market for its latest release and could well have planned on the right output to keep some disappointed, which would increase demand for the next round. 

  7. Barbara Jorgensen
    March 13, 2012

    To Anna's point: In Boston, we used to have a saying that excused the behavior of one of our best Red Sox players. “That's Manny being Manny.” Guess what happened? Boston eventually tired of his antics and traded him. Arrogance is only amusing for so long, and then people tire of it, no matter how good your performance is.

  8. _hm
    March 13, 2012

    If you work in design and manufacturing with extreme pressure for time to market, you wish for need to give time to these engineers. If no, there may be another problem like one with Apple iPhone with Antenna problem.


  9. t.alex
    March 18, 2012

    Yes this is quite true. Apple could have delayed the launch for suppliers to provide parts but they might not know the demand would be as strong.

  10. Anne
    March 18, 2012

    I think this is one of Apple's strategies to impress people that its products are hot cake. It's now common that at any new release of iPad there is always shortage in supply where the demand is greater.  It's become Apple's way giving impression that all the ipads role out are totally sold off.

  11. JADEN
    March 18, 2012

    The same experience when Apple released iPad 2, It's like Apple is deliberate in making its iPad demands chaotic.

  12. _hm
    March 18, 2012

    What is wrong with people to wait for few more days or weeks? Apple needs to take calculated risk and take decision for best of its own interest.



  13. t.alex
    March 18, 2012

    JADEN, this might be true as well. Tim Cook should be the operation expert and yet it still happened. Apple may do this deliberately.

  14. JADEN
    March 18, 2012

    @ talex

    I guess it is deliberate.

  15. JADEN
    March 18, 2012

    I don't think Apple is afraid of taking any risk in their supply, but they are just playing game.

  16. t.alex
    March 31, 2012

    So 99 percent it is on purpose. I believe if this was a real problem, someone might have been fired.

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